The Devil is in the Details: Ensuring the Future of New York’s Charter Movement

Somewhat buried in the coverage of the passage of the state’s budget was some great news for charter schools (beyond the needed and much appreciated $430 in additional per pupil for schools statewide). The budget included a little noticed and seemingly small “technical” change making permanent how rental assistance is calculated for schools in New York City under the Facilities Access Law.

Recall that in 2014, state law, for the first time, provided certain new and expanding charter schools in New York City access to facilities funding in the form of rental assistance. To determine how the rental assistance amount was calculated, the Facilities Access Law created two categories of schools:[1]

(1) For schools that are authorized to open or expand to provide new grades in 2014-15 and thereafter through September 2016, rental assistance is calculated as the lesser of (i) the actual rental cost or (ii) 20% of per-pupil funding (Education Law §2853(3)(e)(5)); and

(2) For schools that are authorized to open or expand to provide new grades after September 2016, rental assistance is to be calculated pursuant to a set of formulas set forth in the state’s Building Aid program (Education Law §2853(3)(e)(6)).

Given the timing, only this first category of charters have accessed rental assistance. Under the prescribed formulas, charters have benefited from not just how simply rental assistance is calculated, but also how easily it has been accessed and paid to them. Not only that, but schools planning to expand can easily calculate how much rental assistance will be available in future years – a huge advantage when schools are trying to budget for the out-years.

While this is all well and good, the Charter Center started to look ahead to how schools that fell under the second category – those having to access the Building Aid program after September 2016 – would fare. We didn’t like what we saw: the more we researched, the more we understood that using Building Aid formulas to calculate rental assistance would be unsustainable for the charter sector, and could dramatically hinder growth in New York City.

New York’s Building Aid is a program that reimburses expenses incurred by school districts for the construction of new buildings, renovation of district-owned buildings, and purchase and lease of existing buildings. Building Aid, therefore, is a critical lifeline for school districts to continue to make capital investments—in 2015-16, the total amount of Building Aid provided to NYC by the State is estimated to be nearly $1.1 billion.

Without getting too far into the weeds, it is enough to know that districts are reimbursed under Building Aid only after the State Education Department reviews the specifications of the (re)construction, and only for approved costs that factor in, among other things, room dimensions, and the types of students using the facilities. In this context, Building Aid works well for school districts, which have the benefit of large capital reserves, and sophisticated infrastructure to plan for, design, and undertake major capital projects. In contrast, charter schools operate in a vastly different fiscal and operational reality that is characterized by:

(1) Limited Planning Time. Charters operate with much tighter timeframes for acquiring and constructing facilities – Often, newly chartered schools have less than a year to acquire and then retrofit a facility to be suitable for school purposes. Given that any capital project undertaken by a charter would have to be reviewed by the State Education Department, its capacity to create a fiscally responsible plan would be severely limited;

(2) Lean Staffing. Charters often have limited organizational capacity to embark upon complex development projects – Most charters operate with a lean staffing structure that emphasizes instruction and student support, not facilities planning; and

(3) Financing. Charters have little or no capital reserves, rely almost exclusively on per pupil funding which by law cannot be used to fund capital projects, and, unlike school districts, cannot access the municipal bond market to pay for a new building. With limited access to the mechanisms that make financing capital projects viable, charters would be unable to absorb the large amounts of debt necessary for capital improvements, which would effectively render the Building Aid program useless.

Given all of this, the Charter Center’s Policy & Advocacy team worked hard to convince legislators that changing over to Building Aid was untenable and that the current approach to facilities funding should be maintained. We thank the Governor and the State Legislature for hearing our concerns and passing the necessary legislative changes that makes permanent what has been critical to the viability of the sector—knowing what to expect with respect to rental assistance. Such changes will ensure the sector can continue to foster high quality growth by proving timely and adequate funding for facilities.

Whether it’s the definition of a single word or a proposed calculation, it’s critical that we remain vigilant. As the saying goes, the devil is in the details, and nowhere is this more true than in policymaking.

Happily, this particular devil has been dispatched.

[1] Of course, there is a third category of schools: those charters that have fully expanded or are not otherwise expanding grades prior to the 2014-15 school year are ineligible for rental assistance.